Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Macroeconomics

<ul>
<li>India's goods exports grew 41.4% in 2021, outpacing most of the world (including Taiwan, Korea and China). Services exports stayed robust too, and both will boost growth in 2022. </li>
<li>Fixed investment spending was up 11% YoY in Q2-FY2021/22, and will likely strengthen further on the back of accelerating corporate profits (evident in surging corporate tax revenue). </li>
<li>Despite renewed disruptions from India's Third Wave of Covid, we expect real GDP to grow over 10% in FY2021/22 and 8%+ in FY2022/23, boosted by robust exports.  </li>
</ul>


India's goods exports grew 41.4% in 2021, outpacing most of the world (including Taiwan, Korea and China). Services exports stayed robust too, and both will boost growth in 2022. 
Fixed investment spending was up 11% YoY in Q2-FY2021/22, and will likely strengthen further on the back of accelerating corporate profits (evident in surging corporate tax revenue). 
Despite renewed disruptions from India's Third Wave of Covid, we expect real GDP to grow over 10% in FY2021/22 and 8%+ in FY2022/23, boosted by robust exports.  


India's Trade-Led Acceleration in GDP Unlikely to Lose Momentum in 2022

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<ul>
<li>As expected, the December review of the <a href="https://www.smartkarma.com/entities/s-p-bse-sensex-index" target="_blank" data-smartkarma-citation="entities:31494:1" rel="noopener">S&amp;P BSE SENSEX Index (SENSEX INDEX)</a> sees <a href="https://www.smartkarma.com/entities/wipro-ltd" target="_blank" data-smartkarma-citation="entities:15360:1" rel="noopener">Wipro Ltd (WPRO IN)</a> added and <a href="https://www.smartkarma.com/entities/bajaj-auto-ltd" target="_blank" data-smartkarma-citation="entities:3613:1" rel="noopener">Bajaj Auto Ltd (BJAUT IN)</a> deleted.</li>
<li>Buying on Wipro is 2.5 days of ADV and 8.2 days of delivery volume, while selling on Bajaj Auto is 4.5 days of ADV and 8.9 days of delivery volume.</li>
<li>The overweight of the Information Technology sector in the Sensex gets even bigger and the Consumer Discretionary sector gets even more underweighted vs the BSE All Cap Index.</li>
</ul>


As expected, the December review of the S&amp;P BSE SENSEX Index (SENSEX INDEX) sees Wipro Ltd (WPRO IN) added and Bajaj Auto Ltd (BJAUT IN) deleted.
Buying on Wipro is 2.5 days of ADV and 8.2 days of delivery volume, while selling on Bajaj Auto is 4.5 days of ADV and 8.9 days of delivery volume.
The overweight of the Information Technology sector in the Sensex gets even bigger and the Consumer Discretionary sector gets even more underweighted vs the BSE All Cap Index.


SENSEX Dec 21 Index Rebalance: Wipro Added, Bajaj Auto Deleted

<div>The <a href="https://www.smartkarma.com/entities/s-p-bse-sensex-index" target="_blank" data-smartkarma-citation="entities:31494:1" rel="noopener">S&amp;P BSE SENSEX Index (SENSEX INDEX)</a> is the flagship index of the Bombay Stock Exchange (BSE). The index has 30 stocks and is a free float weighted market cap index. The next rebalance will be effective after the close of trading on 17 December.</div><div>
The December review uses the market cap and turnover data from 1 May to 31 October to determine the stocks to be included and excluded from the index, and the announcement of the changes is done 4 weeks before the rebalance effective date.
With 6 days to go in the review period, we see <a href="https://www.smartkarma.com/entities/wipro-ltd" target="_blank" data-smartkarma-citation="entities:15360:1" rel="noopener">Wipro Ltd (WPRO IN)</a> as a high probability index addition. <a href="https://www.smartkarma.com/entities/bajaj-auto-ltd" target="_blank" data-smartkarma-citation="entities:3613:1" rel="noopener">Bajaj Auto Ltd (BJAUT IN)</a> is the lowest ranked index constituent and is a likely deletion from the index.
There is a (slim) possibility of <a href="https://www.smartkarma.com/entities/nestle-india-ltd" target="_blank" data-smartkarma-citation="entities:13101:1" rel="noopener">Nestle India (NEST IN)</a> being deleted from the index if it fails the annualised traded value test. As it stands, it is touch and go for the stock.
Passive trackers will need to buy over 2 days of ADV on <a href="https://www.smartkarma.com/entities/wipro-ltd" target="_blank" data-smartkarma-citation="entities:15360:1" rel="noopener">Wipro Ltd (WPRO IN)</a> and sell over 3.5 days of ADV on <a href="https://www.smartkarma.com/entities/bajaj-auto-ltd" target="_blank" data-smartkarma-citation="entities:3613:1" rel="noopener">Bajaj Auto Ltd (BJAUT IN)</a>. If <a href="https://www.smartkarma.com/entities/nestle-india-ltd" target="_blank" data-smartkarma-citation="entities:13101:1" rel="noopener">Nestle India (NEST IN)</a> is deleted instead, passive trackers will need to sell 7 days of ADV on the stock.
In terms of delivery volumes, the impact is much larger with passive trackers needing to buy 8.5 days on <a href="https://www.smartkarma.com/entities/wipro-ltd" target="_blank" data-smartkarma-citation="entities:15360:1" rel="noopener">Wipro Ltd (WPRO IN)</a>, while selling either 8.8 days on <a href="https://www.smartkarma.com/entities/bajaj-auto-ltd" target="_blank" data-smartkarma-citation="entities:3613:1" rel="noopener">Bajaj Auto Ltd (BJAUT IN)</a> or 13 days on <a href="https://www.smartkarma.com/entities/nestle-india-ltd" target="_blank" data-smartkarma-citation="entities:13101:1" rel="noopener">Nestle India (NEST IN)</a>.
</div>

The S&amp;P BSE SENSEX Index (SENSEX INDEX) is the flagship index of the Bombay Stock Exchange (BSE). The index has 30 stocks and is a free float weighted market cap index. The next rebalance will be effective after the close of trading on 17 December.
The December review uses the market cap and turnover data from 1 May to 31 October to determine the stocks to be included and excluded from the index, and the announcement of the changes is done 4 weeks before the rebalance effective date.
With 6 days to go in the review period, we see Wipro Ltd (WPRO IN) as a high probability index addition. Bajaj Auto Ltd (BJAUT IN) is the lowest ranked index constituent and is a likely deletion from the index.
There is a (slim) possibility of Nestle India (NEST IN) being deleted from the index if it fails the annualised traded value test. As it stands, it is touch and go for the stock.
Passive trackers will need to buy over 2 days of ADV on Wipro Ltd (WPRO IN) and sell over 3.5 days of ADV on Bajaj Auto Ltd (BJAUT IN). If Nestle India (NEST IN) is deleted instead, passive trackers will need to sell 7 days of ADV on the stock.
In terms of delivery volumes, the impact is much larger with passive trackers needing to buy 8.5 days on Wipro Ltd (WPRO IN), while selling either 8.8 days on Bajaj Auto Ltd (BJAUT IN) or 13 days on Nestle India (NEST IN).


Sensex Dec 2021 Index Rebalance Preview: Wipro Should Be Added, Deletion Has An Interesting Option

Led by a powerful rebound in exports (+38.1% YoY in Jul-Sep 2021, and 43.4% YoY in Jan-Sep 2021) and stronger investment spending evident in capital goods output (+19.1% YoY in August, +60.1% YoY in Apr-Aug 2021) and machinery imports (+53.1% YoY in Apr-Sep 2021), we continue to expect at least 10.5% real GDP growth in FY2021/22 (well above the IMF's forecast of 9.5%). Private consumption has been relatively sluggish, but shows signs of a pickup since September. After likely growth of 15% YoY in 1H-FY2021/22, real GDP will comfortably exceed 6% YoY growth in the second half of the fiscal year. 
The external balances remain particularly robust, with a current account surplus of 1.25% of GDP in FY2020/21 followed by a surplus of 0.9% of GDP in 1Q-FY2021/22 (Apr-Jun 2021) despite a sharply wider merchandise-trade deficit. With robust capital inflows, India's foreign reserves have risen 16% YoY to US$639.5 billion as of 8 October 2021. The fiscal deficit will likely be much smaller than the officially-projected figure, as revenues have soared while expenditure has been restrained: in the first 5 months of FY2021/22 (Apr-Aug 2021), the fiscal deficit was just 31.1% of the projected estimate for the full fiscal year -- particularly helped by the 70.5% YoY rise in net tax revenues, led by corporate tax revenue rising 160% YoY and customs duties 136% YoY. Given the robust external liquidity position, and a sharp improvement in the fiscal balance, we expect the global rating agencies to be obliged to raise India's sovereign rating by a notch over the next year. 
The strong fiscal position allows the possibility of reductions in excise duties on petroleum products to keep those prices in check as global crude-oil prices rise. CPI inflation (the RBI's inflation target) has already moderated to 4.35% YoY in September, and will likely moderate to 4% by November as the near-normal monsoon results in a bountiful kharif harvest. We expect CPI inflation to remain below 5% YoY in Jan-Mar 2022 too (despite the low base, which leads the RBI to forecast 5.8% inflation during that quarter). With inflation surprising to the downside, we think the RBI will have room for a cut in the policy rate (or other easing measures such as reductions in CRR) after the next Budget is presented. Despite challenging valuations (which will improve as the economy strengthens further and EPS growth stays robust), we recommend staying Overweight India.

Led by a powerful rebound in exports (+38.1% YoY in Jul-Sep 2021, and 43.4% YoY in Jan-Sep 2021) and stronger investment spending evident in capital goods output (+19.1% YoY in August, +60.1% YoY in Apr-Aug 2021) and machinery imports (+53.1% YoY in Apr-Sep 2021), we continue to expect at least 10.5% real GDP growth in FY2021/22 (well above the IMF's forecast of 9.5%). Private consumption has been relatively sluggish, but shows signs of a pickup since September. After likely growth of 15% YoY in 1H-FY2021/22, real GDP will comfortably exceed 6% YoY growth in the second half of the fiscal year. 
The external balances remain particularly robust, with a current account surplus of 1.25% of GDP in FY2020/21 followed by a surplus of 0.9% of GDP in 1Q-FY2021/22 (Apr-Jun 2021) despite a sharply wider merchandise-trade deficit. With robust capital inflows, India's foreign reserves have risen 16% YoY to US$639.5 billion as of 8 October 2021. The fiscal deficit will likely be much smaller than the officially-projected figure, as revenues have soared while expenditure has been restrained: in the first 5 months of FY2021/22 (Apr-Aug 2021), the fiscal deficit was just 31.1% of the projected estimate for the full fiscal year -- particularly helped by the 70.5% YoY rise in net tax revenues, led by corporate tax revenue rising 160% YoY and customs duties 136% YoY. Given the robust external liquidity position, and a sharp improvement in the fiscal balance, we expect the global rating agencies to be obliged to raise India's sovereign rating by a notch over the next year. 
The strong fiscal position allows the possibility of reductions in excise duties on petroleum products to keep those prices in check as global crude-oil prices rise. CPI inflation (the RBI's inflation target) has already moderated to 4.35% YoY in September, and will likely moderate to 4% by November as the near-normal monsoon results in a bountiful kharif harvest. We expect CPI inflation to remain below 5% YoY in Jan-Mar 2022 too (despite the low base, which leads the RBI to forecast 5.8% inflation during that quarter). With inflation surprising to the downside, we think the RBI will have room for a cut in the policy rate (or other easing measures such as reductions in CRR) after the next Budget is presented. Despite challenging valuations (which will improve as the economy strengthens further and EPS growth stays robust), we recommend staying Overweight India.  

India: Capex- & Export-Led Rebound Likely to Receive Fiscal and Monetary Fillip Too

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Taiwan Semiconductor (TSMC) / Technical Analysis

Emerging market equities have been one of the worst areas to invest in 2021, but we see early signs of positive change. With the US dollar failing to break above resistance at $93.50 and the MSCI EM ETF (EEM-US) displaying a false breakdown at $52, we believe now is an opportune time to add exposure to emerging market equities. To be clear, we are not getting overly bullish on EM; we have favored developed int’l (EAFE) over EM since May, and we are now shifting back to a neutral stance between the two. We see reason to believe the tide is shifting in EM’s favor. Below we highlight attractive and actionable themes within EM.

Emerging market equities have been one of the worst areas to invest in 2021, but we see early signs of positive change. With the US dollar failing to break above resistance at $93.50 and the MSCI EM ETF (EEM-US) displaying a false breakdown at $52, we believe now is an opportune time to add exposure to emerging market equities. To be clear, we are not getting overly bullish on EM; we have favored developed int’l (EAFE) over EM since May, and we are now shifting back to a neutral stance between the two. We see reason to believe the tide is shifting in EM’s favor. Below we highlight attractive and actionable themes within EM.

Shifting Exposure To Emerging Markets; Buying TSMC/Taiwan Semi, ICICI Bank, Many Others

India

The S&P BSE Sensex Index is a cap-weighted index. The index members have been selected on the basis of liquidity, depth, and floating-stock-adjustment depth and industry representation. Sensex has a base date and value of 100 in 1978-1979. The Index shifted to free-float methodology since 09/01/03. Please see {SNSXOLD Index <GO>} for mid-month options.

S&P BSE SENSEX Index (SENSEX INDEX EQUITY)

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S&P BSE SENSEX Index (SENSEX INDEX EQUITY)

India's Trade-Led Acceleration in GDP Unlikely to Lose Momentum in 2022

Goods export growth of 41%YoY in 2021 was the fastest in Asia. Robust goods & services exports plus accelerating investment will ensure 10%+ RGDP...

Prasenjit K. Basu

SENSEX Dec 21 Index Rebalance: Wipro Added, Bajaj Auto Deleted

Wipro will be added to the Sensex in December while Bajaj Auto will be deleted. Impact on both stocks is over 8 days of delivery volume to trade....

Brian Freitas

Sensex Dec 2021 Index Rebalance Preview: Wipro Should Be Added, Deletion Has An Interesting Option

Near the end of the review period, we see Wipro as a high probability add. Bajaj Auto could be deleted as the lowest ranked constituent, but Nestle...

Brian Freitas

India: Capex- & Export-Led Rebound Likely to Receive Fiscal and Monetary Fillip Too

After likely real GDP growth of 15%YoY in Apr-Sep21, the fiscal coffers are full; this will allow oil excise duty cuts. With inflation below 5%,...

Prasenjit K. Basu

Shifting Exposure To Emerging Markets; Buying TSMC/Taiwan Semi, ICICI Bank, Many Others

We see early signs of positive change within EM, and we present a strong case as to why we believe now is an opportune time to add exposure.

Vermilion Research

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